Facebook share price: what to expect from Q2 earnings

When does Facebook report its Q2 earnings?

Facebook will report its quarter two (Q2) earnings aftermarket on 24 July 2019.

The stories the markets are following:

1. Financials
2. Usership
3. Regulatory tightening
4. Libra-coin

Financials

Equity analysts are expecting another mixed quarter of results from Facebook, but the long-term picture is expected to remain solid. Annualised revenue, net-income and earnings growth are forecast to be solid, but the company is expected to show the effects of fines and ongoing legal costs. The earnings outlook remains positive for Facebook, however, courtesy of strong growth in the company’s WhatsApp and Instagram applications, and expected user growth and therefore advertising revenue through those platforms.

Usership

Facebook users are expanding, and are expected to continue to expand, into the future. But the rate of user growth and user frequency is slowing. Having battled through a terror year for public relations, following several high-profile instances of data and privacy breaches, investors will be monitoring to what extent these controversies have eroded consumer engagement and trust. This relates especially to the impact this dynamic has had on Facebook’s digital advertisement revenue – which remains the company’s major revenue source.

Regulatory tightening

Facebook has attracted the ire of regulators, politicians, the public and markets for its questionable approach to users’ privacy. Only a month ago did the US Fair Trade Commission slap a $5 billion fine on the social media giant for repeated breaches of privacy laws. Of even greater concern to market participants is growing calls from policymakers, and even US President Donald Trump, to introduce anti-trust legislation against US tech giants, to curb their growing monopolistic behaviour.

Libra coin

Another source of controversy, and excitement, around Facebook this reporting season is the company’s recently announced plans to launch its own cryptocurrency, libra coin. Though unlikely to change the fundamental perceptions of Facebook’s current value, investors will be watching for commentary from the firm about its ambitious desire to launch its own currency. Further to this will be the market’s response to the viability of the project before its proposed launch in 2020 – from both the operational and regulatory perspectives.

In the numbers - the financial metrics to watch:

Stock analyst recommendations and consensus price target:

Source: IG charts

What might the markets’ outlook be from Facebook’s earnings?

Overall, the outlook for Facebook remains solid. Uncertainty around the company will likely remain high into the future, as regulatory risks mount, and the company launches into ambitious new projects and business models. But Facebook’s core business looks capable of growth, with analysts expecting earnings to continue to expand at an industry-competitive tick.

The current share price remains below equity analysts’s consensus target, suggesting long-term upside for the company’s shares. Momentum indicators also suggest the trend is higher, although a short-term pullback in the price may be afoot as technicals climb towards overbought levels.